Most private investors have built oil-powered inefficient plants because of their low construction costs and short lead times, and the oil price has skyrocketed since these plants were built in 1990s. The result is 18-20 hours of load shedding across most of Pakistan in the scorching summer heat in spite of the fact the taxpayers have shelled out billions of dollars in subsidies to the power sector since 2008.
According to an AP report, the Pakistan's government has assumed $3.6 billion of the power industry's debt. The government-owned power grid owes another $2.5 billion to private-sector generators, even as the government, according to Finance Ministry figures, spent at least $7.4 billion on electricity subsidies during the 2008-2010 period.
Here's Arif Habib Securities investment analysis of the IPPs sector:
All power companies from Arif Habib Limited research coverage witnessed surprising growth (36-58%) in net profitability. HUBC led the flock with 58% YoY jump in profit after tax, attributable to the growing indexation factors and ROE component. On the other hand, lower payables to fuel supplier and resultantly lower penal interest provided major support to KAPCO, pushing the net profitability up by 36% YoY. As far as Nishat group companies are concerned, rising fuel cost magnified the impact of fuel efficiency, which combined with O and M savings further improved the profitability. However, dividend from KAPCO and NPL disappointed the optimistic investors. Arif Habib Limited believes the dividends to rise in 2HFY13 for these companies, providing investor with greater value at the financial year end.
|Source: IMF Pakistan|
Pakistani government buys electricity from IPPs at a rate of Rs. 12.50 per KWhr while the consumers pay an average of Rs. 9.00, leaving a short-fall of Rs 3.50 per unit which is subsidized by the taxpayers. It adds up to hundreds of billions of rupees a year. Power subsidy target for FY 2012-13 was set at Rs 185 billion, 60 percent lower than the actual subsidy provided during FY12. The subsidy provided year-to-date (YTD) is Rs 311 billion, already having exceeded the target by 68 percent, according to PakTribune.
In a blog post published in Financial Times, Dr. Kamal Munir of Cambridge University's Judge Business School blames the IPP contracts signed as part of the power privatization in 1990s.
“The 1994 privatization of the energy sector offered investors generous returns and created pricey overcapacity,” he told Financial Times. “This created an expensive legacy which is the real problem of today’s energy crisis.” Unless that problem is dealt with, he sees no light at the end of the energy tunnel.
He says Pakistan’s government, helped by the World Bank, “sweetened” its energy privatisation with attractive conditions, fearing it wouldn’t be able to attract investors otherwise. It guaranteed a 12 to 15 per cent annual return (indexed in dollars, not rupees), gave tax breaks and paid interest on private funding – more expensive for the government than providing the funding itself. ”The deal was too good to be true for investors,” Munir says.
Munir says the model turned out to be badly constructed in terms of creating value for the government and people of Pakistan. Even in an environment of economic growth and efficient energy generation, it would have been hard for the government to finance the plan. But since both have been absent, it became nearly impossible to pay for privatised energy.
Since there were no incentives to be fuel-efficient, most private investors chose to build plants using furnance oil as fuel because of their low construction costs and short lead times. This backfired as the oil price has trebled since the 1990s. Variable costs, and therefore prices to consumers, are at unsustainable levels. “No wonder many consumers can’t afford to pay their bills,” Munir says.
To make things worse, the government neglected to step on the brakes when its generous conditions attracted too many investors. Assuming economic growth would continue, it allowed too much capacity to be built and guaranteed the same return on that extra capacity, whether it was used or not.
Munir says the government should develop new power plants using cheaper fuels, and that this shouldn’t be a problem in a country with an abundance of coal, waterways and sun.
But Pakistan must first escape its vicious payment cycle.
“We need to get out of the the current deals,” says Munir. But at what cost, and does this imply default? “Your guess is as good as mine,” the academic admits.
Still, he felt it was time to make his point. “I’m not defending people who don’t pay bills and I’m not promoting government subsidies to keep prices low,” Munir says. “But why isn’t anyone talking about the policy that led to this situation to begin with?”
|Fuel Cost per million BTU|
1. Developing its shale gas reserves estimated 51 trillion cubic feet near Karachi in southern Sindh province. The US experience has shown that investment in shale gas can increase production quite rapidly and prices brought down from about $12 per mmBTU in 2008 to under $2 per mmBTU recently. Pursuing this option requires US technical expertise and significant foreign investment on an accelerated schedule.
2. Increasing production of gas from nearly 30 trillion cubic feet of remaining conventional gas reserves. This, too, requires significant investment on an accelerated schedule.
3. Converting some of the idle power generation capacity from oil and gas to imported coal to make electricity more available and affordable.
4. Utilizing Pakistan's vast coal reserves in Sindh's Thar desert.
5. Hydroelectric and other renewables including wind and solar. Several of these projects are funded and underway but it'll take a while to bring them online to make a difference.
In my view, the newly-elected government should pursue all of the above options with options 1, 2 and 3 as a priority for now. Its best interests will be served by developing its own cheap domestic shale gas on an accelerated schedule with Saudi investment and US tech know-how.
Comprehensive Energy Policy for Pakistan
IPP Contracts in Pakistan
Pakistan Needs Shale Gas Revolution
US Census Bureau's International Stats
Pakistan's Vast Shale Gas Reserves
US AID Overview of Pakistan's Power Sector
US Can Help Pakistan Overcome Energy Crisis
Abundant and Cheap Coal Electricity
US Dept of Energy Report on Shale Gas
Pakistan's Twin Energy Crises
Pakistan's Electricity Crisis
Pakistan's Gas Pipeline and Distribution Network
Pakistan's Energy Statistics
US Department of Energy Data
Electrification Rates By Country
CO2 Emissions, Birth, Death Rates By Country
China Signs Power Plant Deals in Pakistan
Pakistan Pursues Hydroelectric Projects
Pakistan Energy Industry Overview
Water Scarcity in Pakistan
Energy from Thorium
Comparing US and Pakistani Tax Evasion
Ayup. Thank you for laying it out like that.
Riaz these facts are known to everyone but it is due to massive corruption & criminal Negligence that we are suffering .Itis a joke that only today The Care Taker PM took notice of the massive Load Shedding across Pakistan.You might be knowing that 94 MW DHA Cogen PP has not been commissioned for last four years or so due to Corruption & incompetence of all concerned .Shame on them.
Tafseer Saahab, then why do I only hear about a shortfall from everyone? Politicians, technocrats, ... You name it
Tafseer: "Riaz these facts are known to everyone but it is due to massive corruption & criminal Negligence that we are suffering.."
If these facts r known how come there's no coverage or discussion of it in the media?
the reality is that pak power infrastructure is heavily dependent on diesel. for diesel we are dependent either on our western allies for economic support or the arab allies for crude oil supply.
we need to move either to coal (locally available in abundance) or invest in the greener solutions like solar PV or solar thermal infrastructure that does not require ongoing payments to oil suppliers.
Pakistan needs a revamp of our energy infrastructure. I cost around $500K / megawatt for Solar PV and a little leas for solar thermal solutions.
if we are 7000MW short - it will take us about $3.5B to $4.0B to set up the evergreen infrastructure to support the needs.
this can be achieved in 2-3 years. and any international or a local bank would love to finance that if the federal government is willing to goo full force with this approach.
Riaz these have been frequently discussed ,deliberated during various Energy Conferences ,Seminars etc.but those at the Power Centers are not bothered to take actions. Take the case of Thar Coal Project this was almost finalized with Chinese Co. in 2005 but was subotaged by certain Quarters & now we are in a Crises Situation .Still efforts are being made to facilitate this Project & we at Institution of Engineers Khi Through aThink Tank Committee are involve in persuing the Sind Coal Authority to initiate as soon as possible but who know what will happen in future.
I met someone recently in Karachi who is working on the coal project. What are the price comparisons for Diesel vs. gas vs. coal powered power stations. In terms of coal, if the coal mining is a success, how long does it take to establish a coal powered plant ?
Imran: "What are the price comparisons for Diesel vs. gas vs. coal powered power stations."
Both imported coal and domestic shale gas will be a lot cheaper than furnace oil.
Coal is $2 per mmBTU vs furnace oil at $18 per mmBTU, a ratio of 1 to 9. Domestic shale can be $5-$8 per mmBTU. In US, shale is $2 per mmBTU, comparable to coal....offering to purchase it at a higher rate of $5 to $8 can attract US companies to develop shale gas in Pakistan.
The power companies are private and the government has contracted to pay them a certain price. But due to excessive line losses due to theft (about one third) and the government itself not paying for the power its many protected departments consumes (about another third) there is not enough money to pay back the power companies who then cannot maintain the generating capacity. What a simple and circular mess.
30 % theft is not unknown in our part of world. nothing new.
but 30 percent usage in govt organization is too much, I mean are they govt owned factories or something, because offices cant consume 30 percent electricity.
Why is not all these factored into price that consumer pays. You dont pay tax, so this is another way of paying it.
Indian: "30 % theft is not unknown in our part of world. nothing new.
but 30 percent usage in govt organization is too much, I mean are they govt owned factories or something, because offices cant consume 30 percent electricity...."
Indian states also subsidize power but the subsidies are smaller and more affordable because 80% of power in India is generated using domestic coal which is about one-tenth the cost of imported oil.
Here's a Daily Times report on SC hearing on load shedding:
....A three-member bench, headed by Chief Justice Iftikhar Muhammad Chaudhry and including Justice Chaudhry Ijaz Ahmed and Justice Gulzar Ahmed, noted on Tuesday that there could be a genuine problem, “but now it seems that there was an involvement of artificial factors, particularly the high inefficiency of the Pakistan Electric Power Company (PEPCO) (Private) Limited and the National Transmission and Despatch Company (NTDC) Limited officials”.
The court said that production of power plants below their capacity could be one of the reasons of severe load shedding in the country.
The court was informed that the Guddo Thermal Power Plant’s total capacity was 1,650MW, but it was presently producing 775MW, while the Jamshoro Thermal Power Plant had a capacity to produce 1,000MW, but it was generating only 300MW.
Moreover, Muzafargarh plant’s capacity was 1,100MW, but it was presently producing only 700MW.
PEPCO Managing Director Zargham Ghulam Ishaq Khan informed the court that the deterioration in production was due to faults in the machines and that spare parts had to be changed.
The court was informed that after several steps, about 975MW had been added to the current system, which would reduce the intensity of load shedding in the country.
He told the court that the technical audit of some of the thermal plants had been carried out and the machines shall be made functional to their full capacity.
He maintained that during the last couple of days, power generation had dropped drastically due to various technical reasons.
He informed the court that due to the non-availability of oil and gas to the power sector, the current power crises had gotten worse. He said that arrangements had been made for the supply of furnace oil to the plants, adding that natural gas would also be supplied to the companies so that maximum output was generated.
About the hydroelectric power plants, the MD said 60% to 70% of their capacity had been increased, and they were presently generating 3,900MW. The generation capacity could further be increased if discharge from Tarbela, Mangla and glacier melting was increased, he added.
PEPCO engineer and consultant Raziuddin, who appeared voluntarily, told the Supreme Court that the company and the NTDC needed a fulltime managing director rather making makeshift arrangements. He said that PEPCO had sufficient capability to make the units functional. He said the Gudu Power Plant had the installed capacity of 1,650MW, while it was currently generating 775MW due to fault in various machines, which needed to be fixed. He gave the example of a machine, stating that only fixing of one machine could add 100MW of electricity to the system.
The PEPCO MD replied that they had already completed the audit of all the machines and they had also fixed machines number 5 and 7 at Gudu, adding that the current output of the plant was 835MW and not 775MW.
He said that Jamshoro Power Plant, after necessary repair work, was ready to generate 750MW. The CJ asked why were they not generating 750MW from Jamshoro, on which the MD said that due to the deficiency of furnace oil, they could not go ahead with the new additional capacity. He further added that power generation addition would be about 975MW after the new steps by the PEPCO
Here's a BMI report on Pak energy sector:
Boston, MA -- (SBWIRE) -- 05/24/2013 -- Successive energy shortages in Pakistan have led the government to acknowledge that longterm gas self-sufficiency has become impossible. A March 2013 agreement with Iran on the development of the IP pipeline by 2015 could ease the risk of an energy shortage. Domestic consumption continues to rise rapidly, boosted by the start-up of additional gas-fired power stations and continued use of Condensate Natural Gas cars. As import volumes rise, LNG is set to become part of the energy mix. In the meantime, Pakistan will again attempt to privatise more of its various state-controlled energy companies and stimulate investment in domestic oil and gas production. While we do not believe it would render Pakistan gas selfsufficient over the next 10 years, the recent start-up of shale gas exploration creates a large upside risk to our forecast.
View Full Report Details and Table of Contents
The main trends and developments we highlight for Pakistan's Oil & Gas sector are:
- Energy minister Asim Hussein has acknowledged that the current situation in Pakistan requires policy rationalisation. Several steps have been taken including a rise in regulated gas prices, a revamp of licensing regulation to promote exploration and distribution of production in local markets, the offer of 60 onshore blocks in a licensing round, offshore and unconventional exploration, and development of necessary import infrastructures.
- We expect gas reserves to fall until 2022 as consumption increases from 39bn cubic metres (bcm) in 2012 to 55bcm by the end of the forecast period. Production will not follow that trend. We see gas output peaking at 40.1bcm in 2015 and falling afterward to slightly above 35bcm by 2021 as the Sui Gas Field, the main producing field in Pakistan, reaches the end of its life.
- We see oil demand rising from an estimated 376,600 barrels per day (b/d) in 2012 to nearly 482,000b/d in 2022, about 30,000b/d more than previously forecast. While we expect production to continue its increase throughout the decade, this will leave the county with a growing import requirement. From 62,000b/d in 2011, we see oil output growing steadily until 73,500b/d in 2022.
- LNG imports will start in 2013. The government expects to import 2bcm of LNG in 2013, acquired on the spot market and arriving at Port Qasim. International supply contracts are to be allocated for up to 8bcm in the coming years, while discussions have reportedly already started with the US and Qatar.
- The controversies surrounding the IP and TAPI pipelines continue, with the US providing increasing support for Pakistan to meet its energy needs through LNG imports. While we can still see some risks to the completion of the line, especially from a political perspective, the IP pipeline appears to be on its way to start first flows in 2015. We do not believe that LNG imports will be sufficient and we hardly envisage a scenario where neither pipeline is completed by the end of the decade.
Dear Riaz I wish to share my inside feeling regarding IPP business, being a considerate and knowledgeable as I had been working in IPP, conceiving idea, making feasibilities, negotiating EPC, PPA ,FSA/GSA and IA, submitting operational parameters to operator…..revealed these IPP are minting money, making money on every account especially on fuel consumption, efficiency, fuel condition etc there are many hidden cost recovering with many folds…alas….these are mostly pass through cost which we and our future generation will pay ….as PPA is limited to minimum 25 years….want to elaborate these but do not know which forum I should use…though it is dangerous topic… ,,,,,,advise…should i…..
Zafar: "I wish to share my inside feeling regarding IPP business, being a considerate and knowledgeable as I had been working in IPP, conceiving idea, making feasibilities, negotiating EPC, PPA ,FSA/GSA and IA, submitting operational parameters to operator…..revealed these IPP are minting money, making money on every account especially on fuel consumption, efficiency, fuel condition etc there are many hidden cost recovering with many folds…alas….these are mostly pass through cost which we and our future generation will pay ….as PPA is limited to minimum 25 years….want to elaborate these but do not know which forum I should use…though it is dangerous topic… ,,,,,,advise…should i…"
Your description tells me that there's a scandal here. The power market is being deliberately manipulated by a few to make a lot of money at the expense of millions of Pakistanis. It reminds me of the Enron scandal in US which caused load-shedding in California because of market manipulation. Enron falsely blamed it on gen capacity constraints cause by tough environmental regulations in California. Several Enron executives were convicted and jailed. You will be doing a great service to the suffering Pakistanis by exposing the manipulators. I will gladly publish it on my blog as a guest post under your name if you write it up and send it to me. I will also publicize it as much as possible to various fora.
It's the anti hydroelectric lobby, the insane opposition of Kalbagh Dam and it's aftermath which saw hydroelectric development pushed back by decades , the daft notion that by using oil we are helping out oil rich Muslim friends this resulted in complete lack of imported coal capacity , a mistake the present government or soon to be government is likely to replicate in light of the COI decision , the provincial loo
Javed: "It's the anti hydroelectric lobby, the insane opposition of Kalbagh Dam..."
I don't think Kalabagh or any other dam will solve this problem. Hydroelectric is good but it's seasonal and variable, not enough to satisfy growing 24X7X365 demand. The problem is much bigger. What is needed is a comprehensive energy policy. The IPP contracts need to be renogiated to ecourage fuel efficiency and low cost of generation. Pakistan needs to use all available resources including coal and shale gas to ensure energy independence. Please read my post on it. http://www.riazhaq.com/2012/06/comprehensive-energy-policy-for.html
Sorry to disagree yes hydroelectric power is. Seasonal and needs winter energy from thermal sources but it is economic. Had Kalabagh or Basha been built entre cost could have been recoverd by avoided fuel costs in the last few oil shock years . We do need a comprehensive energy policy and as an sub set a comprehensive power policy . Coal needs to take up increasing share in the energy mix , this needs to be done at a fast pace if affordable energy is to be made available
Javed: "Sorry to disagree yes hydroelectric power is. Seasonal and needs winter energy from thermal sources but it is economic. Had Kalabagh or Basha been built entre cost could have been recoverd by avoided fuel costs in the last few oil shock years"
I agree that hydro needs to be part of the mix.
why were oil fired plants allowed in the first place?
Everybody knows oil is very expensive.
Coal is the cheapest source of power everywhere.Shale gas is so far only a US phenomenon.
But the problem is in any case 5 years will be required to solve this problem. Operationalizing mines in Thar and building 7000MW+ capacity plants will take at least 5 years.This is over and above the time to figure out a financial model to make the whole thing viable and sustainable.
^^RH: "I don't think Kalabagh or any other dam will solve this problem. Hydroelectric is good but it's seasonal and variable, not enough to satisfy growing 24X7X365 demand"
Seasonable & variable power comes from run-of-the-river (non-storage) Hydroelectricity plants.
Kalabagh is not a run-of-the-river dam. It is essential a massive storage dam and can easily produce 24X7X365 steady electicity production.
Neelum-Jhelum Hydro project, on the other hand, IS a run-of-the-river and will produce seasonal variable power (more during summers and less during winters).
hydel power has a lot of potential.....let the planner should invest on the run of a river.............see upper part of chitral.....i have seen a heavy current available around the year....i can present a detailed feasibility report with identification of site ...for multiple generation......i can share other thermal plant (utlization gas ,low B TU configration, coal , CW Slurry a lot other those can be economical and can utilized on energy.....
Zafar: "hydel power has a lot of potential...."
I agree. Especially microhydro power on thousands of water falls all over the Northern areas can add up to a lot of MWs and change people's lives. Some of it is already happening under self-help rural support program like Agha Khan Rural Support.
Many modern hydrologists believe that big storage dams are not the best answer. They are known to cause environmental damage downstream. Water storage can take other forms like many smaller reservoirs of rain and river water and recharging of groundwater aquifers being depleted by heavy use of tube wells all over South Asia.
HWJ: "Seasonable & variable power comes from run-of-the-river (non-storage) Hydroelectricity plants.
Kalabagh is not a run-of-the-river dam. It is essential a massive storage dam and can easily produce 24X7X365 steady electicity production."
Water levels in storage dams DO affect power output. Here's a recent story:
The water reservoirs at Tarbela and Mangla on Saturday reached dead level, further reducing the country’s already inadequate hydropower generation and increasing the odds of prolonged blackouts across the country. Water level in Mangla Dam has reached 1,040 feet, with a disproportionately large outflow of 31,182 cusecs against an inflow of 15,465 cusecs. The inflow of water in Tarbela Dam stands at 17,100 cusecs, and the outflow is 16,400 cusecs. In Hyderabad, Water and Power Minister Naveed Qamar hinted at the continuity of unannounced blackouts, saying “it will take time to end load shedding”.
In Pakistani conditions you need the major dams, Tarbela for example has benefited the immediate environment , small storaged are limited and will not result in the quantam of storage that we need , depletion of reservoir is an issue in Punjab, already some areas mine water, at some stage in our hydroelectric development we will need to use tne unsed rivers , Ravi , Sutlej etc. as storageds meant primarily for recharge of the main acquifier . The other area where mining of water is an issue is Baluchistan , where pricing , reuse of water etc need to be introduced now, the almost free electricity to Baluchistan tube wells does not help .
Javed: "In Pakistani conditions you need the major dams, Tarbela for example has benefited the immediate environment , small storaged are limited and will not result in the quantam of storage that we need , depletion of reservoir is an issue in Punjab, already some areas mine water, at some stage in our hydroelectric development we will need to use tne unsed rivers , Ravi , Sutlej etc. as storageds meant primarily for recharge of the main acquifier...."
Low water levels downstream have hurt Sindh delta badly. Sea water has been creeping up and increasing salinity in places like Thatta and Badin. The Water Accord-1991 prescribed at least 10 million acre feet (MAF) water to flow below Kotri barrage to maintain fragile eco system of Indus Delta. However, this flow was seen only during high flood years when surplus was to be drained below Kotri any way. In low flow years, the delta remained dry. The flow pattern below Kotri during post Tarbela Dam years narrates the gradual unfolding of environmental disaster in Indus Delta.http://archives.dawn.com/archives/154813
Riaz there are so many options to produce cheap and environmental safe electricity, it need little investment and commitments.....some time i am lost knowing so much but can not deliver those.....all want heavy upfront heavy amount and again add up those to the capacity payment and again want those upfront kick back and once again on top of that same amount recovery with minimum 14% profit . it is indeed sorry afair, looking for a fourum to provide these dedicated knowledge...which i was able acquire over 24 years actually working on power plant /ipp
^^RH: "Water levels in storage dams DO affect power output. Here's a recent story:
The water reservoirs at Tarbela and Mangla on Saturday reached dead level, further reducing the country’s already inadequate hydropower generation..."
Not if the dams are designed and maintained correctly.
Tarbela & Mangla were built using circa 1950s designs & technologies. They do not have bottom-discharge sluice gates as all modern large dams do. Therefore, they cannot be flushed and require expensive maintenence to remove silt accumulation. Given our dismal record at maintaning anything, both dams have been left to silt to such as extent that they are incapable of storing much water.
Tarbela & Mangla, in their current condition, called really be called big-storage dams.
A Chinese team recently came in to see if desiltation was practical at this advanced stage of decay. The team examined the dams and found the situation to be so bad that they concluded that it would be cheaper to abandon them (or blow them up) and build new dams from scratch elsewhere. You can search this on the internet.
We have brought this upon ourselves. We are responsible for the neglect. We have no one else to blame.
^^RH: "The flow pattern below Kotri during post Tarbela Dam years narrates the gradual unfolding of environmental disaster in Indus Delta..."
It is not the dams, per se, that are causing this enviromental disaster. It is the excessive and illegal diversion of water by Punjab that is causing this ruin.
In other words, previously non-arable land is being turned into arable land by illegal extension of irrigation upstream in Punjab, while previously arable land is being turned into non-arable land downstream in Sindh.
This means that all the land that is 'lost' by the downstream Sindhis is being 'gained' by the upstream Punjabis.
So the Sindhis are correct when they say, "hamari qabron par yay Punjabi apna mahal bana rahen hain"
Watch all four parts of Aaj ki Baat:
Watch all four parts of Off The Record:
HWJ: "It is the excessive and illegal diversion of water by Punjab that is causing this ruin."
This charge is not necessarily accurate but it's quite usual among lower riparians. Pakistan blames India and some in Sindh blame Punjab, etc. It's also happening in other countries such as India among Indian states.
Part of the problem in Pakistan is the inadequate irrigation methods and water management.
Here's an excerpt from a recent piece published in The News:
HYDERABAD: Because of the poor irrigation system in Sindh, crop cultivation patterns are changing in the province, and it’s not a change for the better. For example, delta crops are being introduced in areas where other crops are traditionally grown. The result: erosion of soil fertility in Sindh.
“We have reached a point where planning and taking of preventive measures is increasingly difficult,” water and agriculture expert Mohammed Khan Mari told The News.
Mari, who formerly headed the Drainage and Reclamation Institute of Pakistan (Drip), has also been associated with the Pakistan Council of Research in Water Resources as a lead researcher. He also worked on water-management projects in UAE and other countries.
The unprecedented rains and floods of the past three years did produce one positive effect, said Mari: they washed away salinity, and thus some barren land was reclaimed. But the negative effects of the consecutive calamities over three years were devastating, he explained. These included a rise in the underground water table, which produced water-logging, and that in turn affected land fertility.
“In parts of Umerkot and Mirpurkhas districts where the rains and floods removed salinity, farmers produced bumper crops,” he said. “But in Thatta and Badin in the coastal areas farmers are panicked, because they lost their lands to the rise in the underground water table.”
Mari blamed the increasing land salinity in Sindh on the provincial irrigation department’s release of water to major canals greater in amounts greater than the channels’ designed capacities. For example, Jamrao Canal, built in 1901 with a capacity of 12,000 cusecs now receives 15,000-16,000 cusecs. The result is the destruction of hundreds of acres of land in the Nara Valley zone. Similarly, Rohri Canal was built in 1932 for conveying 10,000 cusecs; it has overshot its capacity by more than 2,000 cusecs. Government officials fail to realise how this practice is affecting the lands, Mari complained....
Here's a Nation newspaper report on German financing of hydel projects in Pakistan:
A delegation of the KfW Development Bank, Germany, headed by Dr Claudia Loy called on Wapda Chairman here on Monday and discussed with him the matters relating to financing of various hydropower projects.
The KfW Development Bank is providing 97 million Euros for the construction of 122 MW-Keyal Khwar and has also committed to co-finance the 35 MW-Harpo Hydropower Project along with its French counterpart AFD by providing 20 million Euros. In addition, the KfW Development Bank has also shown interest in financing the 80 MW-Phandar Hydropower Project.
During the meeting with the KfW Development Bank’s delegation, Wapda Chairman thanked them for their support in financing a number of Wapda projects.
He expressed the hope that the cooperation between the KfW Development Bank and WAPDA would be further enhanced in the days to come. He apprised the delegation that main works of Keyal Khwar Hydropower Project will soon be initiated, as all the pre-requisites are almost finalised in this regard.
Wapda Chairman expressed the hope that KfW Development Bank will come forward for better investment opportunities in other hydropower projects and well being of the people of Pakistan.
The KfW Development Bank Division Chief, appreciating the technical expertise of WAPDA, said that WAPDA is one of the best organizations in Asia. She said that the KfW Development Bank and WAPDA have a long history of mutual cooperation, adding that the Bank would continue supporting WAPDA for construction of water and hydropower projects.
We feel Pakistan’s energy sector needs more financing from Germany, she added.
Here's a report on Karachi's KSE-100 hitting new highs:
Pakistani stock market surged by over 500 points today to a record high of 21,500 points on heavy buying by overseas investors, amid reports government plans to sell treasury bills worth USD 5 billion to pare debt.
The Karachi Stock Exchange's benchmark 100-share index closed 2.59 per cent, or 542.86 points, higher at 21,501.72.
"The market was buoyed by reports today that the new government plans to sell USD 5 billion in treasury bills to pay off a chain of debt that has led to power crisis and is affecting the economy," Sohail Ahmed, a market analyst, said.
The new government is planning to pay off the debt within the first 100 days in power as it believes the economy will only be lifted and foreign investments will grow if the power shortage crisis is dealt with immediately, said experts.
In Lahore, Pakistan's Prime Minister-designate Nawaz Sharif pledged that the incoming PML-N government would make efforts to overcome power problem as soon as possible.
The stock market rally came after two straight days of decline.
On the previous two trading days, the stock market saw profit-booking after a wave of massive buying saw investors betting big that the crisis-ridden economy would revert back to high growth under Sharif, set to become premier for an unprecedented third term.
The Pakistani rupee also remained stable on Tuesday ending in the market on 98.43/98.49 against the US dollar.
Sharif, himself an industrialist and co-owner of diversified multi-million dollar conglomerate Ittefaq group, has said that revival of economy would be among his top priorities. He is seen by many in Pakistan as someone who can fix the country's bleeding economy.
There are only 569 listed companies on the Karachi Stock Exchange, as against about 5,000 in the Indian stock market, where total investor wealth is close to Rs 70 lakh crore.
The number of companies listed on KSE has come down in the past few years, from more than 650 in 2009, as the country's economy has been struggling amid a turbulent political scene.
However, a clear mandate in the just-held historic polls is expected to revive the economic activities and therefore the stock markets as well.
^^RH: "Pakistan blames India and some in Sindh blame Punjab, etc..."
There is NO evidence of any massive extension of irrigation in Indian-held Kashmir. Besides the population there is only about 10 million.
There is PLENTY of evidence of massive extension of irrigration (some legal, some illegal) in Punjab. And the population there is about 100 million.
Please, let us try to be honest.
NWJ: "Please, let us try to be honest"
With your history of biased comments against Pak Punjabis and for Indians, I don't expect any better from you.
EXIM Bank China to provide $ 448 mln for 969 MW Neelum Jhelum project, reports APP:
ISLAMABAD, May 29 (APP): The EXIM Bank of China has signed an agreement with the Government of Pakistan to provide US $ 448 million for 969 MW-Neelum Jhelum Hydropower Project.An official sources told APP that the agreement was a significant development in the efforts to secure requisite financial resources for the remaining works of under-construction Neelum Jhelum Hydropower Project.Neelum Jhelum Hydropower Project is being constructed on River Neelum in Azad Jammu and Kashmir. They said that in addition to generating much-needed low-cost hydel electricity to help mitigate power shortages in the country, the project is also equally important for Pakistan to establish priority water rights. In view of its significance, WAPDA is making all possible efforts to complete Neelum Jhelum Hydropower Project by 2016 according to its construction schedule, they said.
The sources said construction work on all sites of the project was progressing satisfactorily. Out of total 67-kilometre (km) tunnels, 34.24 km long tunnels (51 percent) had so far been excavated, while excavation of under-ground power house stood at 75.24 percent and transformers hall at 96.33 percent.
They said 95 percent work on de-sander of the project had also completed while Nauseri Bridge over River Neelum was also constructed. Second stage diversion of the River Neelum had also been completed.
It is pertinent to mention that Neelum Jhelum Hydropower Project, on completion, will contribute 5.15 billion units of cheap electricity every year to the National Grid. Annual benefits of the project have been estimated at about Rs. 45 billion.
Here's a Dawn report on Pak-Turk school students placing second in an international contest:
Two students from Islamabad have bagged silver medal in the world finals of the International Computer Projects Competition held recently in Romania by giving solution to end loadshedding and resolve issue of energy theft.
Shahbaz Khattak and Abdul Muizz Lodhi of PakTurk School Islamabad have designed a GSM-based Automatic Meter Reader (AMR) which was presented in the Infomatrix Romania where their project won silver medal in the category of Hardware Control.
AMR can collect consumption data from power, gas and water meters without involvement of meter readers. It transmits data to central database of service providing company for billing, troubleshooting, and analysis.
AMR saves utility providers the expense of visiting every location to read a meter, its billing is based on actual consumption rather than estimates, past or predicted consumption.
Moreover timely information can help utility providers and customers’ better control usage and production.
It provides accurate data, track usage, improve energy management, detect tempering and cut operational costs by discouraging wastage to boost profit. It can be used for security and fire alarm systems.
Khattak and Lodhi said that metre reading will no more remain a time consuming and labour intensive manual process if gas, power and water utilities employ ARM which will also settle the issues of complaints by consumers and increasing energy theft presently estimated at Rs250 billion annually.
Also, some modification can enable power companies to switch off air conditioners and other home appliances drawing extreme amounts of energy remotely which will end the need of loadshedding in Pakistan where over 5000MW is consumed by A/Cs in summer, the students said.
Commenting on the development PakTurk officials Kamil Ture and Turgut Puyan said that participation in global competitions and winning prizes has become a regular feature for Pakistani students which reflect their talent.
Educational institutions should encourage young to apply their imagination, passion, and creativity to make a difference.
The competitions are not just about promoting professional excellence; it also serves to promote intercultural dialogue and cooperation, said Ture.
Hundreds of students from many countries including United States, United Kingdom, Germany, Russian Federation, Macedonia, Belgium, Romania, Poland, Hong Kong, Bosnia and Herzegovina, Tanzania, Afghanistan, Turkmenistan, Ukraine, Vietnam, Hungary, Mexico, Azerbaijan, Georgia, Ecuador, Thailand, Indonesia, Turkey, South Africa, Kazakhstan, Laos, Colombia, Kenya, Albania, Iraq, and Malaysia participated in the event and presented projects covering a wide variety of topics.
Here's a PakistanToday Op Ed on energy crisis:
The debate during the election was played out as a blame game between the PML-N and the PPP. The PML-N blamed the PPP for the rental power plants while its chief economic ideologue Sartaj Aziz blamed it for its 1994 power policy. The PPP’s rejoinder was that the PML-N had “cancelled the contracts of around 24,000MWs of Independent Power Plants (IPPs)” in their 1997-99 tenure, arguing that “had this additional power been available to the national grid today there would be no shortage.” But here lies the fundamental problem in the electricity debate: the crisis is not a crisis of capacity.
With over 20,000 MWs of generation capacity, Pakistan’s power sector far exceeds peak demand that hovers around 17,000 MWs. What both parties – and the PTI too – gloss over is that their energy policies during the 1990s were in fact identical. In 1992, at the insistence of the World Bank and IMF, the PML-N government’s Cabinet Committee on Privatisation approved a Strategic Plan for Restructuring WAPDA. The plan involved “unbundling” WAPDA’s Power Wing and shifting the burden of generation and distribution to the private sector. When the PPP was at the helm next, it approved the World Bank championed 1994 Power Policy which offered astonishing terms to private investors – including a 80:20 debt-to-equity ratio, minimal taxes, guaranteed capacity payments even if power plants were not producing.
The first major step in the direction was the announcement of the Hub Power Project, a 1,292 MW private sector project described as the “Deal of the Year” and later as the “Deal of the Decade.” The Hubco deal was followed by the signing of 16 IPP contracts to add 3,400MW of private thermal power to the grid, at a time when the future shortfall was assessed to be between 1000 and 1,500 MW. The PML-N, which now apparently questions the terms of the deal, only continued the process once it returned to power. In sanctioning the creation of NEPRA in 1997 and approving the unbundling of WAPDA into 13 units: eight distribution companies (DISCOS), three generation companies (GENCOS) and the National Transmission and Dispatch Company (NTDC), operating under the newly created Pakistan Electric Power Company (PEPCO). The unbundling of the WAPDA Power Wing was supposed to move the power sector “from an inefficient state-controlled monopoly to a competitive, market-driven system.” The actual plan, as the IMF describes it, was to “ready the power sector for a more attractive packaging to be sold to private investors.”
Smaller units of WAPDA could be privatised much more easily. That was the plan the PML-N had approved in 1992 and set up for packaging in 1998. Now that it has returned in 2013, the energy plan it has announced its intention to “finish their unfinished business.”
The PML-N envisages a three-step plan. Step one: merging the Ministry of Petroleum and the Ministry of Water and Power. Step two: raising Rs500 billion through treasury bills, bank loans and printing money and paying off the circular debt. Step three: selling government shares in public-owned power companies, reducing its share to 51 percent and handing over their management to private investors. The move is expected to raise another Rs500 billion. . ...
Here are excerpts of an ET report on load shedding:
Not only does there seem to be no early end in sight to the power crisis, but Pakistan’s energy woes will also be a huge drag on economic growth, reveals the Pakistan Economic Survey 2012-13 launched here on Tuesday.
“The critical issue is that, according to National Transmission and Despatch Company (NTDC), the annual electricity demand growth rate is forecasted to hover around 5 to 6 per cent over the next ten years. With the current position of [power generation] expansion, it seems that the crisis will not [soon] be over, which in turn will affect economic growth,” the survey revealed.
As of March 2013, the number of consumers has increased to 21.704 million, although the consumption pattern has remained more or less the same in 2012-13, with domestic consumers standing at 43 per cent, industrial consumers at 26 per cent and agricultural consumers at about 11 per cent.
The survey stated that Pakistan’s power sector is heavily dependent on gas supplies, and the reduction of this supply, due to misallocation and low growth, has crippled its performance.
There was negative growth in the consumption of gas during Jul-March 2012-13. The analysis of the sectoral consumption indicates that during July-March 2012-13, the highest share in gas consumption remained in the power sector (27.5 %) followed by industry (22.6 %).
As the government accorded a priority to providing gas to households, the share of households in gas consumption remained 23.2 per cent. However, the trend of providing gas to the power sector is declining since 2005-06 except in 2012, where there was a growth of 6 per cent. Transport is the other significant sector that posted a positive growth in gas consumption of 5.3 per cent during 2011-12, however, during July-March 2012-13 a negative growth of 16 per cent has been witnessed in this sector.
At 16 per cent, the share of the fertilizer industry still remains significant but there was negative growth of 7 per cent in 2012, as compared to the previous year.
Increased gas demand and investment on the cards
It is expected that gas will be supplied to approximately 39,000 new consumers and about 350 new towns/villages will be connected to the gas network during the fiscal year 2013-14. Gas utility companies have planned to invest Rs17437 million on transmission projects, Rs27,265 million on distribution projects and Rs11,165 million on other projects, bringing the total investment of Rs. 55,867 million during the fiscal year 2013-14....
Here's FT on Pakistan's plan to settle electricity debt (called circular debt):
Pakistan is to borrow more than $5bn to pay off the country’s outstanding electricity bill amid rising anger over power cuts that have exploded into violence in some cities.
Parts of Pakistan have remained without electricity for up to 20 hours a day this summer. According to the finance ministry, the shortages have caused annual losses equivalent to 2 per cent of GDP.
The move, by the new government of Prime Minister Nawaz Sharif, constitutes a gamble. The administration is looking for a quick-fix solution to ease the power crisis but some argue that by taking on more borrowing it will only lead to further debt problems in the longer term.
The government is to raise $5bn through the sale of government bonds to pay off the debt owed to the country’s private electricity producers as well as fuel suppliers.
“We have to take our country out of the mess we are in” said Ishaq Dar, the finance minister, on Thursday announcing details of the scheme. “Clearing this backlog is our top priority”.
The government has said it will clear the debts by August this year in what is the largest such single payment to tackle serious shortages of electricity in the country’s history.
Though many analysts support Mr Sharif’s government for moving to settle the outstanding bill, some are more cautious. “The government really has to reform the electricity sector where the problems are huge” said Sakib Sherani, a prominent economist. “Without reforming the sector, this decision (settling the electricity bill) could be a gamble”.
While the upcoming payments may clear the backlog of dues that have forced some electricity producers to scale down their operations, analysts warned that the power shortages were a consequence of a poorly run government-owned electricity transmission system.
In some areas of Pakistan, between 30 to 40 per cent of electricity gets lost before it reaches end users. This is mainly due to inefficient transmission systems and theft involving corrupt officials who team up with private consumers to supply connections that are never billed.
“The financial settlement will help to tackle the immediate crisis. Once the payments are made, we should have more electricity in the system,” said Shuja Rizvi of Al-Hoqani securities stock brokers in Karachi. “The danger is, there must be very aggressive reforms to tackle the [power] losses as the root cause. Otherwise, this problem will return to haunt us”.
Here's a Central Asia Online report on energy projects in Pakistan:
Pakistan is at least 5,000MW short of what it is needs to support the country this summer, the Water and Power Development Authority (WAPDA) reported. On one day in May, the national power grid generated 9,200MW, 7,000MW short of demand, UPI reported.
The acute energy crisis has taken its toll on industry, agriculture and the job market, costing millions of Pakistanis their jobs over the past 10 years, according to economists.
"The energy crisis has reduced GDP growth by 2.5-3% [per year], and it directly affects the 2.5m new job seekers who enter the market every year," Dr. Ashfaq Hassan, an economist, told Central Asia Online, adding that millions of Pakistanis lost their jobs because of the crisis in the last decade.
Pakistani energy potential
It is not a matter of lacking energy resources, but rather it is a matter of properly tapping into Pakistani potential, Hassan said.
The country has large potential for economic growth and employment if exploited carefully, he said.
Pakistan in a few years could overcome the energy crisis and massive unemployment, and the GDP growth would be higher if load shedding vanished, economist A. H. Nayyar said.
The country's power potential is 59,208MW for hydropower; 100,000MW for coal; 7,500MW for wind; 2,000MW for solar; and 25,031MW for thermal, WAPDA spokeswoman Farhat Jabeen told Central Asia Online.
Projects boost energy production
The energy crisis seems to be worsening day by day, but the power generation projects are now increasing hope and the country's future is not as dark as it once seemed.
Several stakeholders are involved and the authorities are trying hard to contain the power shortage and load shedding in Pakistan, Jabeen said.
Construction is progressing on 17 small- to medium-size dams and other power-generating projects, and some of them should be ready within a few months, she said.
More than 400MW will be added to the national grid this month, and another 4,000MW in the next five years, she added.
Three dams are nearing completion and two others are scheduled to be finished in 2015, official records reveal.
Improving job market and alternative energy
Besides helping to ease the energy crisis, the projects will boost employment.
The dam projects, for example, have directly employed 19,200 workers in the past five years, the WAPDA dams director said.
The energy development sector has provided more than 100,000 jobs in various projects over the past eight years, official records reveal.
Energy development projects are already denting the unemployment rate. There are also expectations that the increased employment will trickle down to industry and agriculture.
Development activities like those in the energy sector always have a positive effect on other areas of the economy, Nayyar said, noting more job opportunities will come to cement and other industries.
Alternative energy plans on tap, too
The government is not only encouraging the dams as energy sources but also promoting solar, wind, nuclear and other means. It initiated projects in this direction as well.
The Alternative Energy Development Board initiated wind, solar and other projects that will add 500MW to the national grid within two years, Chief Executive Arif Alauddin told Central Asia Online.
But the potential for such projects is much greater as these sectors are attracting huge investment, he said.
Here's a GlobalPost report on coal conversion of gas-oil-fired power plants in Pakistan:
Pakistan has asked the Manila-based Asian Development Bank to help finance two coal-fired power units at the Jamshoro thermal power station in Sindh, a senior official of Pakistan's Water and Power Development Authority told Kyodo News this week.
Zafar Umar Farooqi, chief engineer at the authority, said Pakistan had initially sought a $433 million ADB loan for one 600-megawatt unit but the bank has now been asked to consider a loan for two units.
He said the size of ADB loan will be decided after consultations with the bank, but he indicated the total cost of Jamshoro project would be around $1.5 billion.
The government-owned WAPDA operates an 850-MW oil-gas fired thermal power plant at Jamshoro at less than 40 percent of its capacity because of a shortage of fuel oil and gas.
The ADB loan will be used to convert the existing plant to coal and set up an additional coal-fired plant at the site, increasing installed capacity at Jamshoro to 2,050 MW.
The government has already invited expressions of interest from consultants to oversee construction at Jamshoro, which is about 150 kilometers northeast of Karachi and uses water from the Indus River for cooling.
Pakistan has long examined setting up coal-fired power plants to use its own lignite coal, but efforts have been unsuccessful because of the high ash content in the coal.
Ismail Khan, senior external relations officer for the ADB for Pakistan, said the new units at Jamshoro would be designed to use mixed local and imported coal, most probably from Indonesia.
Farooqi said separate tenders will be invited for conversion of existing Jamshoro plant from oil-gas to coal.
Pakistan has an acute power shortage and the new government of Pakistan Muslim League (N) has given top priority to increasing power generation.
Here's a report from The National newspaper on Pakistan switching from oil to coal:
Pakistan plans to use a port in the Arabian Gulf to import coal and to reduce its dependence on more costly GCC oil. That dependence is "killing its economy", said the country's water and power minister in Dubai yesterday.
One of the aims of the expansion of Gwadar port in Pakistan's Balochistan province is to help Pakistan to overcome an energy crisis by widening the mix of its power supply. The port is financed more than 80 per cent by the Chinese.
Currently oil from Saudi Arabia, the UAE and Kuwait has accounted for "almost all" of Pakistan's energy imports, said Khawaja Asif, the water and power minister, speaking on the sidelines of the US-Pakistan Business Opportunities Conference in Dubai.
"We can develop some area close to Gwadar port for coal imports and coal-based plants. We will import coal from different places like South Africa, Indonesia and Australia," said Mr Asif. "It will lessen our dependence [on oil].
"The energy mix we have today is killing our economy and not providing us with cheap electricity."...
Coal accounts for only 1 per cent of Pakistan's energy generation even though Thar mines in Pakistan's Sindh province account for the world's third-largest coal reserves. While Gwadar will help to serve Pakistan's energy needs, attracting greater scrutiny is China's plans to use the facility.
In February, the management of the port was handed from Singapore's PSA International to Chinese Overseas Port Holdings. Gwadar's close proximity to the Strait of Hormuz, through which a large portion of the world's oil flows, will give energy-hungry China closer access to GCC crude.
The two sides plan to link Gwadar, in the south-west of Pakistan, with China's far western province of Xinjiang through road and rail connections. The proposals have stirred anxiety among officials in New Delhi , where there are concerns that the facilities may be part of a Chinese attempt to encircle India through a string of overseas ports stretching from Gwadar to Myanmar.
Mr Asif played down the geopolitical significance of the port.
"It's purely a commercial thing and will develop a backward province of Balochistan and create job opportunities," he said.
The port aspired to follow the lead set by the thriving commercial trading hubs of Dubai and Singapore, he added. The government of Pakistan's newly elected prime minister, Nawaz Sharif, has declared Gwadar a duty-free port on the lines of Jebel Ali.
"In Dubai and Singapore and all of these ports there economies are based on their ports and access to major sea routes," Mr Asif said.
Here's a Dawn report on MOU with IPPs on new terms:
A meeting presided over by Finance Minister Ishaq Dar decided to make the payment to IPPs to clear a major part of the Rs506bn circular debt with four major conditions for which a fresh memorandum of understanding (MoU) will be signed on Friday morning, followed by immediate disbursements, finance ministry spokesman Rana Assad Amin told Dawn.
In return, the IPPs will commit in writing in the MoU to achieve their maximum generation capacity and provide 1,700MW to the national grid before Ramazan.
The Hubco, Lalpir, Pakgen and Saba plants, having almost 1,800 megawatts capacity, will make a commitment to convert to coal-based power generation within 16 months.
All IPPs have also agreed to reduce their interest rate on receivables by two percentage points from the existing Kibor (Karachi Inter-Bank Offer Rate) plus four per cent and increase their credit period from 45 to 60 days to ease the payment pressure on distribution companies.
Since the two relaxations would require amendments to the existing power purchase agreements, the IPPs would initially sign an MoU, Mr Rana said. Subsequently, the National Electric Power Regulatory Authority and Private Power and Infrastructure Board would approve an addendum to the agreements, he said.
He said the IPPs and the government had agreed to resolve through arbitration their dispute over Rs23bn outstanding amounts currently pending before the Supreme Court.
Here's a report on the outline of Nawaz Sharif's govt's energy policy:
Pakistan's federal government released a new energy policy that promises new investments in the power generation sector to address power outages.
According to the new policy, Pakistan will increase its power generation capacity to a total of 26,800 MW over the next 3 years. The country currently can generate about 21,100 MW, mostly from fossil fuels and hydropower.
At the same time, Pakistani policymakers are looking to reduce the production costs of electricity.
Pakistan's rolling blackouts can last nearly a 24-hour period and affect as many as 180 million people at a time, according to reports.
Nawaz Sharif, the prime minister of Pakistan, will formally announce the implementation details of the energy policy at a joint session scheduled July 29.
The policy will consist of four key points, including reducing demand and supply differences, keeping consumer prices low, investing in the energy sector and preventing electricity theft.
Here's a NY Times story on KESC performance in Karachi:
Since Pakistan’s biggest electricity company was privatized, its headquarters has been looted, its employees kidnapped and its boss nearly arrested by the government.
Despite all of that, it is regarded as a roaring success.
Power cuts lasting 12 hours a day or more have devastated the Pakistani economy. The loss of millions of jobs has fueled unrest in a nuclear-armed nation already beset by a Taliban insurgency.
The only city bucking the trend is the violent metropolis of Karachi, Pakistan’s financial heart — and that is thanks to Tabish Gauhar and his team at the Karachi Electricity Supply Co.
“It has consumed every ounce of my energy,” Mr. Gauhar, 42, said in an interview. “But we have helped millions of people.”
The new government of Prime Minister Nawaz Sharif won an election in May partly because it had promised to fix the power cuts. Now many are wondering whether the Karachi utility’s successful privatization will be repeated elsewhere.
Pakistan’s power companies share similar problems. Workers are often corrupt, and influential families rarely pay bills. The government sells power below the cost of production but pays subsidies late or not at all. Plants cannot afford fuel.
At the state-run Peshawar Electricity Supply Co., the majority of workers are illiterate, most new hires are relatives of existing staff members, and 37 percent of the power generated was stolen, according to a 2011 audit funded by the U.S. Agency for International Development.
Karachi Electricity Supply had all the same problems when the Dubai-based private equity firm Abraaj Capital bought a controlling stake in 2008. Mr. Gauhar and his Abraaj team decided to slash the work force by a third, cut off nonpayers and destroy illegal connections.
Many in the populist pro-labor government vilified the power company. Later, legislators tried to arrest Mr. Gauhar on charges that he had not attended subcommittee meetings in the capital.
After the protests dissipated, Karachi Electricity Supply’s next problem was making customers pay. More than a third of the company’s electricity was stolen in 2009. Those who got bills often ignored them.
One wealthy patriarch said he could not possibly start paying because his colleagues would think he had no influence left.
Karachi Electricity Supply started cutting off those who did not pay their bills. When a transformer burned out in an area with high theft, the company asked for two months’ worth of payment from the area’s residents before replacing it.
The company divided up the city of 18 million. Areas where 80 percent of people pay bills now have no regular power cuts. Areas with high loss — often crime-ridden, sweltering slums — have long power cuts. Karachi Electricity Supply is widely hated in such places.
Muhammed Fayyaz, who works as a driver, says his neighborhood often has as much as 10 hours of cuts per day. Summer temperatures top 40 degrees Celsius (104 Fahrenheit), and protests are frequent.
“People block the main road and throw stones at passing vehicles,” he said.
Mr. Fayyaz lives in a high-theft area. Stealing power is easy. Makeshift wires with metal hooks festoon Karachi Electricity Supply’s lines in the sun-baked streets. Some lead to roadside businesses. Others head into the distance atop lines of makeshift bamboo poles.
“We clean them up, but in five minutes they are back again,” said Muhammad Siddiq, a manager at the utility.
Here's a Daily Times report on Pakistan settling "circular debt" owed to IPPs:
In order to eliminate circular debt, the government has released Rs 362 billion to the Independent Power Producers (IPPs), out of which four IPPs announced that they have received a total sum of Rs 116.826 billion as a part of their overdue receivables, according to the Karachi Stock Exchange (KSE) notice released on Tuesday.
Five IPPs out of 19 others, in Memorandums of Understanding (MoUs) signed between government and IPPs, including Hub Power Company Limited (Hubco), Nishat Chunian Power Limited (NCPL), PakGen Power Limited (PKGP), Kohinoor Energy Limited (KEL) and Nishat Power Limited (NPL) have announced officially in notices to all bourses of the country that they have received around Rs 116.826 billion from Central Power Purchasing Agency (CPPA), Water and Power Development Authority (WAPDA) and National Transmission and Despatch Company (NTDC).
Hubco remained prime beneficiary as the company stated in a letter to the KSE that the company has received overdue amounting to Rs 75 billion out of Rs 83.2 billion (overdue as of May 31, 2013) for Hubco and Rs 17.4 billion for Narowal Plant from WAPDA and NTDC, bringing the total to Rs 92.4 billion.
Hubco announced that the company has paid Rs 55.8 billion to Pakistan State Oil (PSO) as agreed under the settlement arrangement.
Hubco has entered into three MoUs with the government as required by them for the settlement of agreeing to convert Hub plant from oil to coal, extend the credit period for its Narowal Plant from 30 days to 60 days and to endeavour to operate the plants at full capacity.
Under the MoUs, IPPs also agreed to achieve their maximum generation capacity and provide 1,500 megawatts (MW) to 1,700 MW to the national grid before Ramazan, four IPPs including Hubco, Lalpir, Pakgen and Saba Plant, have agreed on conversion to coal-based power generation within 18 months, extend credit period from 45 days to 60 days and reduce interest rate on late payments by public sector power companies.
Similarly, NCPL announced that the company has received overdue receivables amounting to Rs 6.86 billion from CPPA without any reduction in existing delay mark-up rate of existing 4.5 percent to 2.5 percent as against expected cut of 2.0 percent from 4.0 percent to 4.5 percent.
Likewise, PKGP also informed the KSE that the company has received overdue receivables amounting to Rs 6.982 billion from CPPA at existing delay mark-up rate.
Also, KEL announced in a letter to KSE that the company has received overdue receivables amounting to Rs 3.504 billion from WAPDA.
Muhammad Affan Ismail of BMA Research told this scribe that the fund injections (cash or otherwise) are a short-term solution and have no long-term implications on operational factors or returns to investors. Best would be to recall the Rs 82 billion Tem Finance Certificates (TFCs) issued last year by the government in order to help solve the power crisis, he added.
NPL has announced that it has received overdue amounting to Rs 7.080 billion.
Naveed Tehsin of JS Research believes that PSO stands out as a key beneficiary from the retirement of the circular debt as its receivables and payables to local refineries have sharply declined to Rs 79 billion (down 54 percent) and Rs 9 billion (down 66 percent), respectively.
Tehsin expected that receivables would further decline by Rs 48 billion after the issuance of Pakistan Investment Bonds to PSO.
Privately-held KESC has devised a collective reward and punishment scheme to deal with dead-beats and thieves in Karachi. Areas where there is 90% money recovery see almost zero load shedding, 80% get a couple of hours of power cuts and those with less than 50% endure very long hours of black-outs. http://www.gulf-times.com/pakistan/186/details/358456/pakistan-utility-company-fights-to-power-karachi
Despite raising concerns about the lack of transparency in payments made to IPPs to decrease the circular debt, the Asian Development Bank is planning to offer $2.1 billion in loans for the country’s ailing energy sector.
The investment, planned under the new Country Partnership Strategy (CPS) 2015-19 estimated at $5.1 billion, is expected to be effective from early next year, with 41% of the financing focusing in the energy sector alone, according to finance ministry officials.
With the country facing debilitating energy infrastructure, the new investment will be allocated for transmission, distribution, grid connectivity, hydropower generation and import of gas, according to the draft CPS.
However, Pakistan will be required to take hard decisions aimed at increasing power tariffs, reducing line losses and shifting the energy mix. These conditions to funding are being described as in line with the government’s 2013 National Power Policy.
The multilateral lender hopes that the over $2 billion investment in the power sector in the next three years will allow the government to withdraw electricity subsidies. It is also discussing the condition of reducing line losses and bringing them in line with the benchmark approved by National Electric Power Regulatory Authority (Nepra), according to the draft CPS.
The strategy and the government’s power policy are also aimed at achieving zero load-shedding by 2018, a goal that seems overambitious.
Lack of transparency
While the ADB paints a rosy picture of the country’s power sector five years down the line, it has also highlighted the grave situation faced by the energy sector. The draft document of the CPS states that the private participation in the energy sector has been curtailed because of “chronic concerns about payment to power suppliers, unclear investment policies and lack of transparent payment practices”.
It is the first time that an international lender has highlighted the issue of lack of transparent payment practices in a policy document.
“There were concerns raised on the payments to the IPPs (Independent Power Producers) not being based on merit,” according to the draft CPS. The draft document did not elaborate who raised these concerns.
The issue of favouritism in power payments shot into the limelight in June last year when the government cleared Rs480 billion circular debt. There were allegations that the government made out of turn and excessive payments to a Lahore-based industrialist due to his close proximity with the ruling party.
ISLAMABAD: Federal Minister for Planning, Development and Reforms, Ahsan Iqbal Tuesday said that Energy projects of 16600 Mega Watt (MW) signed under Pak-China Economic Corridor during recent visit of the Prime Minister to China would help overcome energy crisis in the country.
Addressing a press conference here, the minister said that the energy projects would be completed in two phases.
"During the first phase the energy projects of 10,400 MW electricity worth of $15.5 will be completed while in the second phase different projects of 6600 MW electricity will be concluded ", he said adding development of energy infrastructure and up-gradation of system of transmission lines was also included in the agreements.
Ahsan Iqbal said that energy projects of 9000 MW would be completed by 2018 which would mean that the government would be able to eliminate power load-shedding in the country during its tenure.
The minister said that coal-based power plants would generate 7500 MW and the cost per unit of electricity would be about 10 cents which would be far cheaper than that of oil.
He said that under the Corridor, 1000 MW of the largest solar park would also be established in Cholistan while hydal based energy projects would be of 1600 MW.
Giving details about Thar Coal Projects, the minister said that in the first phase two projects of 2000 MW would be developed from Thar Coal while under the agreements with China overall 6600 MW Thar Coal projects would be completed
He said that a package of $650 million was also included in the agreements for development of Gwadar sea port and airport.
Iqbal further said that 1736 kilometers of railway track would be upgraded which would not only help to ease out transportation system of goods and coal but it would also help improving transportation facility for the passengers.
The Minister strongly condemned Pakistan Tehreek-e-Insaf (PTI) Imran Khan's statement against Chinese development assistance to Pakistan under "China-Pakistan Economic Corridor" and said that Pakistan and China are closest friends and enjoy time tested all weather friendship.
"At a time when international investors were shying away from Pakistan due to security environment in the region, decision of Chinese and Pakistani leadership during PM Nawaz Sharif's visit to Beijing to take Pak-China relations to new heights in economic field through China Pakistan Economic Corridor Project is a milestone", he added.
The most critical energy and infrastructure sectors related projects will infuse new life into Pakistan's economy, he added.
He said the projects are in IPP mode as investment projects and rejected Imran Khan's assertion that these projects were being financed through borrowing.
Iqbal said that these projects were coming under the energy policy which was open for all investors from any part of the world.
Excerpt of Dawn Op Ed by Shahid Kardar:
it is particularly disturbing that agreements with the Chinese on power/coal-fired power projects are shrouded in secrecy. Nepra, the power regulator, has determined a rate of return of up to 27pc in dollar terms on such projects that would supposedly also apply to the Chinese investors. This rate is much higher than what is on offer anywhere in the world — the country’s poor image is a significant factor contributing to the lack of investors offering competitive tariffs.
Existing IPPs that were promised a rate of return of roughly 17.5pc actually earn more than double this amount (based on an examination of their financial statements). The resulting outflows of foreign exchange to those investing in power systems will become an unsustainable burden. For a product or service to be sold in local currency, it is a mistake to provide a guarantee against exchange rate fluctuations. The heavy outflows in foreign exchange to ‘service’ these investments/loans will encumber our external account, pressurising a renegotiation of these agreements.
It is the distribution end of the electricity supply chain where management and governance is at its worst. However, privatising these monopolies (DISCOs) would be a complex task without a highly competent regulator in the form of Nepra. Instead of promoting competition, the inadequately equipped Nepra merely functions as a calculator of tariffs. In the UK, there was incentive regulation in place to reduce costs and improve efficiency of operations. Nepra has adopted cost plus guaranteed return-based pricing, an approach discarded by the rest of the world ages ago. Part of the problem is that Nepra was set up with distribution of power as the sole responsibility of the public sector.
The managements of these agencies prefer a cosy relationship with the government so that the independent regulator does not demand improved performance. Even donors and the IMF, on whose insistence Nepra was established in the first place, do not themselves believe in the need for, and efficacy of, such institutions, since the conditonalities attached to their loans have built-in clauses for tariff revision that require Nepra to merely serve as a rubber-stamping authority.
The politics related to liquefied natural gas (LNG) import have again intensified after Pakistan State Oil (PSO) cancelled an import tender in which top global companies like British Petroleum and Shell could have taken part.
Similarly, many tenders were scrapped in the past, but this time experts were hoping for clinching a deal following encouraging response from renowned companies. But the same old episode has been repeated again.
Punjab Chief Minister Shahbaz Sharif and Petroleum and Natural Resources Minister Shahid Khaqan Abbasi left for Qatar, which could be a major source of LNG supply, soon after the PSO tender was cancelled.
This has sparked speculation that the government has already planned to strike an import deal with Doha in a government-to-government contract through one of Prime Minister Nawaz Sharif’s close cronies, who has been residing in the Gulf Arab state for a long time.
During the previous government of Pakistan Peoples Party (PPP), some ministers had reportedly alleged that the man had blocked a gas deal between Pakistan and Qatar. Despite signing of a memorandum of understanding (MoU) between the two countries, Doha at that time did not push ahead with the gas export programme.
Speaking at a public rally, Awami Muslim League President Sheikh Rasheed Ahmed has also accused the PML-N government of favouring some blue-eyed boys in Qatar through a state-to-state LNG contract with Qatar Gas. He said the government was going to strike the LNG deal with Qatar through one of premier’s cronies, Saifur Rehman, who is residing in Doha.
He also pointed out that the government seemed to be in a hurry as it had assigned the special task of finalising an agreement to Pakistan’s ambassador-designate to Qatar.
These speculations seem to be spreading after the chief minister of Punjab went to Doha and met top officials. Then the minister of petroleum joined him.
This suggests two important things. First, the chief minister has a key role in reaching an LNG deal with Qatar and second, the government has made up its mind for an agreement with Qatar and PSO’s tender was mere eyewash.
However, with these developments, Pakistan is going to lose the opportunity of importing LNG at a competitive price. Now, the ball is in Doha’s court and it can demand a price of its choice.
During the previous PPP government, Qatar had revised downwards the LNG price offer to $17.437 per million British thermal units (mmbtu), a 0.5% discount over the previous price of $18.002. This would have led to savings of $1 billion over the 20-year lifetime of the project.
If all charges are included, LNG supplies from Qatar will cost $19.521 per mmbtu and Pakistan will have to spend $200 million on developing infrastructure for handling imports.
Separately, in response to a tender floated by Sui Southern Gas Company (SSGC) for an LNG integrated project, Pakistan Gas Port had offered a bid of $17.7074 per mmbtu while Global Energy International quoted a price of $18.16 per mmbtu.
According to officials, if the government had awarded the contract to the lowest bidder, the price would have stood at $10 per mmbtu following a sharp fall in oil prices in the world market. These prices were even lower than the revised price quoted by Qatar.
AGP finds Rs 980 bn (about US$ 9 billion) irregularities in #Pakistan power sector http://www.dawn.com/news/1208273
The auditor general of Pakistan (AGP) has found embezzlement, misappropriation and irregularities of around Rs980 billion in the accounts of Water and Power Development Authority (Wapda) and other power companies working under the Ministry of Water and Power in the audit year 2013-14 and has asked the president to order investigations into specific cases.
The amount is equal to nearly one-fourth of the Rs4 trillion federal budget for fiscal year 2015-16 and can explain why the government has to inject huge subsidies out of taxpayers’ money every year to clear the circular debt that keep emerging again and again. Over the past five years, the federal government is estimated to have injected more than Rs2 trillion into the power sector, besides increasing consumer tariff by about 200 per cent.
On top of that, the AGP has also made observations over Rs4.2 trillion in an unsettled audit backlog from the past few years.
The audit pertained to Rs414 billion of expenditure and Rs898 billion of revenue for fiscal year 2012-13.
In its report to the president of Pakistan — as mandated under Article 171 of the Constitution — the AGP has put together seven broad categories of findings from an audit of the accounts of Wapda, four generation companies (Gencos), 10 distribution companies (Discos) and the National Transmission and Despatch Company (NTDC).
Wapda’s Directorate General of Audit — a specialised wing empowered to look after power sector accounts — said it had ignored the instances of misappropriation, fraud and other irregularities amounting to less than Rs1 million. In FY2012-13, the directorate said, an audit found 184 cases of irregular expenditures or unjustified payments and rule violations amounting to Rs368.65 billion.
Another 88 cases, worth Rs572.63 billion, pertained to non-recoveries and overpayments; 18 cases to accidents and negligence that cost around Rs19.5 billion; Rs5.8 billion was linked to cases where there were weaknesses in internal control systems; and transactions of around Rs11.8 billion were called into question over non-production of record. Another nine cases, worth around Rs350 million, were related to embezzlement of public money through theft and misuse of funds.
However, at the instance of audit, only Rs31.9 billion could be recovered and the AGP pointed out that it was beyond their capacity to carry out a “100 per cent” audit of these entities.
But the AGP pointed out that the internal control mechanisms in Wapda and its corporate entities did carry out complete audits, which also included consumer service offices, and also carried out physical examinations.
The AGP said that the recurrence of frequent irregularities “cast a shadow of doubt on the effectiveness of this internal control system”. The internal controls, it said, were deteriorating gradually as there had been an increase in cases of unauthorised extension of load, non-implementation of equipment removal orders, theft of material and electricity and violation of procurement rules as well as the Nepra Act.
The audit revealed that power distribution companies could not collect Rs401 billion from various defaulters in FY2012-13, while the procurement of material and consultancy services, provision of PC-1s and contracts involved the violation of procurement rules
“There was poor monitoring of revenue collection, embezzlement of funds, misappropriation and theft of material, misuse of public funds, incorrect billing, non-implementation of commercial procedure and non-adherence to provisions of power policy,” the AGP said.
They Might Be Giants: The World’s Largest Gas Turbines Will Light Up #Pakistan - GE Reports http://www.gereports.com/might-giants-worlds-largest-gas-turbines-will-light-pakistan/#.Vi-QLJpNyu0.twitter …
Each one weighs nearly 400 tons, as much as two really big blue whales. Each one will cover thousands of miles by sea and land from the place of their birth in Belfort, France, to the farming town of Bhikki in Pakistan’s Punjab province. They are still fairly unknown, but once they reach their destination, they will affect millions of lives.
The giants that will be making their way to Asia are a pair of GE’s air-cooled 9HA gas turbines, the largest and most efficient gas turbines on the planet today. They’re capable of delivering greater than 61 percent efficiency – once the power-generation equivalent of running a four-minute mile – when used in a combined cycle configuration with steam turbines. They will become the beating heart of the Bhikki Combined Cycle Power electricity generation plant that’s being built by China’s Harbin Electric International for Punjab government’s Quaid-e-Azam Thermal Power Ltd. utility.
The new power plant will be a key weapon in Pakistan’s arsenal to roll back crippling electricity shortages that have plagued the country for years. “After a while you just have to find ways to work around the load-shedding,” says Muniza Junaid, a biosciences research associate who works at a leading Pakistani university. “It’s ironic. On the one hand, I work in one of the most advanced laboratories in the country, but on the other I can’t even heat up my dinner or run my washing machine when I want to.”
“Load-shedding” is the term locals commonly use to refer to electricity shortages. For many Pakistanis it’s a critical piece of information that determines how they plan their days, just like the weather forecast in the U.S. or Europe. Load-shedding gets ubiquitous in the sweltering summer heat, when power shortages often exceed 12 hours a day. “I don’t think you can understand what that’s like unless you’ve experienced it for yourself,” Muniza says.
Here’s what it looks like in numbers: Pakistan’s peak demand and supply gap hovers around 5 gigawatts, enough power to serve some 30 million local homes. The World Bank reported in its 2013 Enterprise Survey that more than 45 percent of local businesses identified electricity shortages as the main obstacle to doing business. The estimated value lost due to power outages tops 22 percent of annual sales.
No wonder fixing the power shortage is one of the top government priorities and a key to boosting the economy and improving the quality of life. The Bhikki plant will be the first power installation to use the turbines in the Middle East, and one of Pakistan’s most efficient. “Everything about this project is going to be larger than life – the world’s largest gas turbine, powering one of the region’s most efficient power plants, generating electricity for millions of households, as well as industry,” says Sardar Haider Khan, the local lead for GE Power & Water’s power generation products business.
The 9HA is the result of a $2 billion investment by Power & Water. It uses technology originally developed for supersonic jet engines. GE refers to this practice of sharing knowledge among different businesses the GE Store.
The turbine can reach full load in a mere 10 minutes – just a little longer than a plane getting ready to take off – and also offers the flexibility to run on a range of gas and liquid fuels. This is critical for fuel-importing countries such as Pakistan.
The two units at Bhikki will be operated on imported “re-gasified” liquefied natural gas (RLNG), but will be able to use substitute fuels if price or availability of RLNG starts to fluctuate.
Together, they will add more than 1.1 GW to the national grid by 2017 – the equivalent power needed to supply more than six million Pakistani homes. And that is a feat worthy of giants.
#Pakistan stock exchange expects $1 bln of #power IPOs in 2017 and 2018. #loadshedding #energycrisis http://dailym.ai/1TyKvKL via @MailOnline
Pakistan's stock exchange could see initial public offerings of power sector projects amounting to some $1 billion in 2017 and 2018, the bourse's managing director said on Monday.
He also said he also expected Pakistan to regain its stock index emerging market status this year.
Referring to IPOs in the power sector, Nadeem Naqvi told Reuters in an interview:
"The projects that have had financial close and are under construction now, the tendency is that - once they get commissioned - that is the time they come onto the market to restructure their debt-equity ratio, so about $1 billion will come in."
Index provider MSCI said in March it was seeking feedback from investor on reclassifying Pakistan stocks to emerging market status from its current frontier market status - a less liquid and riskier subset of stocks.
The decision to move Pakistan back to the emerging category - from which it was dropped in 2008 - is due in June 2016.
Naqvi said he expected Pakistan to regain its emerging market status soon, if not in June then in December, adding he expected to see money coming in from abroad in anticipation of the decision.
"We saw that in the case of Qatar or the United Arab Emirates, approximately $400 million came in within 6-8 months of the announcement, and the market there is relatively narrow," he said, speaking on the sidelines of a Renaissance Capital investment conference.
"Our market is much more broader, but given Pakistan's risk factor ... I will be very happy if we get about $200-250 million to come in - now this would be the initial arbitragers which would position themselves for the index flows."
Currently, around 30 percent of the freefloat listed on the country's stock exchange was held by international institutional portfolio investors, said Naqvi, adding this would inevitably rise once Pakistan was reclassified.
"Anywhere between 40-45 percent (of foreign ownership) would be a number I would be comfortable with, anything beyond that it becomes risky because the volatility will increase."
He also expects the market capitalisation, currently at $71 billion, to rise above $100 billion in the next five years, thanks to IPOs and share valuations.
"Pakistan's discount against emerging markets is huge, and I think we will be seeing a narrowing of that discount, so even though the global valuations are not going to expand, Pakistan's discount is going to narrow, and there we are going to see that in the market cap."
NAB summons NEPRA over case of unprecedented profits earned by IPPs
Nishat Chunian Power Limited had earned 44.25 per cent profit on equity investments against 14 per cent RoE based on IRR during the financial year 2010-11. Nishat Chunian was asked to explain the reasons for earning additional profits.
Responding to NEPRA, Nishat Chunian power Ltd said that allegations pertaining to submission of fake records during the time of tariff determination were wrong and baseless. However, NEPRA rejected the stance of Nishat Chunian Power Ltd and asked to submit a reply within seven days to avoid action against the company.
Sources also said that the independent power producers (IPPs) and the owners of power plants which were installed during the tenure of the former government of Pakistan Muslim League-Nawaz have been earning additional profits around $1 billion annually, allegedly because of fake records and collection of additional tariffs.
They said that the owners of thermal, coal, wind and solar power plants will additionally collect $19 billion during the next 25 years while the IPPs which are running on oil and gas including Nishat, Chunian, Liberty, Atlas Power etc have earned additional profits in the range of 20 to 64 per cent other than the fixed limit of profits for them. They said that NEPRA had taken notice over additional profits to IPPs in 2014 but stopped the process of inquiry after the passage of one year.
They added that NAB Lahore has expanded the scope of the investigation against additional profits by IPPs and summoned NEPRA officials while the initial inquiry report of NAB has allegedly made responsible officials of the Punjab government, NEPRA and Alternative Energy development Board (AEDB).
A copy of documents available with Pakistan Today reveal that due to the approval of additional tariffs, owners of coal power plants will earn $14.25 billion, while the owners of solar plants will earn $900 million, wind to earn 1.8 million and fuel oil-run power plants will earn $90 billion during the next 25 years allegedly because of an approval of additional tariffs.
Sources in NAB said that power plants installed under the power policy of 2002 and in the rule of PML-N have become a burden on the national exchequer.
They said that Nishat Chunian Power Limited had earned 44.25 per cent profit on equity investments against 14 per cent RoE based on IRR during the financial year 2010-11. Nishat Chunian was asked to explain the reasons for earning additional profits.
Responding to NEPRA, Nishat Chunian power Ltd said that allegations pertaining to submission of fake records during the time of tariff determination were wrong and baseless. However, NEPRA rejected the stance of Nishat Chunian Power Ltd and asked to submit a reply within seven days to avoid action against the company.
Nishat Chunian was also advised to submit a separate statement within 15 days pertaining to its regulated profit and asked to include the financial impact of all items in the statement. Nishat Chunia Power Ltd was also informed about initiation of a suo motu action in case of no proper response over the said inquiry. However, despite the passing of one year, the inquiry has been closed without taking any final decision regarding billions of rupees worth additional profits by influential owners of power plants, said sources.
Power consumers to pay Rs650b capacity charges
The issue of increasing payments of capacity charges will worsen more as the power consumers will have to pay the mammoth amount of Rs650 billion in next financial year 2018-19 as capacity charges, divulges the latest official working also available with The News.
In 2015-16, the end consumers paid the capacity charges, which are fixed cost and included in the tariff, amounting to Rs280 billion and in 2016-17, the consumers paid Rs358 billion in the head of capacity charges which have been projected in 2018-19 at Rs650 billion. About the current fiscal year, the official said that the data is being prepared that is to be finalised by end of the current fiscal.
In next financial year, the Net Hydle Profit, estimated to be soaring up to Rs200 billion to be paid to Punjab and KP, will also be the part of Rs650 billion meaning by that the payment of capacity charges will also continue to haunt the power sector.
On account of the new electricity generation to be added by the incumbent regime will go up to 11,000MW by June 2018, the surplus capacity will be hovering at 4,000MW in winter season and the power consumers will pay their capacity charges.
However, Zargham Eshaq Khan, Joint Secretary (power finance) said that in the last year Rs203 billion has been paid in the form of capacity charges to the power houses excluding the payments of net hydel profit.
Mr Khan said that the government will continue to pay till five years after 2028 as the Power Purchase Agreements (PPAs) with most of the IPPs have been signed for 25-30 years and they will end up by 2028 and capacity charges payments will continue 5 years beyond 2028. He, however, admitted that every year the capacity charges payments to IPPs hovers in the range of Rs150-200 billion.
Secretary Power Division Yousaf Naseem Khokhar while admitting the capacity charges payments a threat to sustainable power sector said that in the past questionable Power Purchase Agreements (PPAs) were done with IPPs which were not in favour of the countrymen. However, the then decision makers are of the view that Pakistan was considered high risk country and no one was ready to invest in power sector. So such kinds of PPAs were inked to ensure the electricity availability in the country. “If one happens to go through such PPAs, one will feel that investors had drafted the PPAs on their own and the state officials had just signed the said agreements. Now many of PPAs of some IPPs are going to expire in 4-5 year and will completely erode by 2027-28.”
“Now after power projects under umbrella of CPEC, there is a line of projects from other economies we have,” he claimed saying that Pakistan now enjoys the luxury to pick up the projects with PPA for 10-15 years at the maximum with no capacity charges in the agreement. In the future, the projects will be entertained with no capacity charges in the agreements.
#Pakistan cabinet opposes renewal of unfavorable 1994 #IPP #power purchase contracts signed by #Zardari. IPPs to be asked to run/sell #electricity to consumers at discounted rates by operating power plants whose contracts will not be renewed. #corruption https://tribune.com.pk/story/2017225/2-cabinet-opposes-renewal-ipp-power-purchase-deals/
The cabinet has backed a proposal that opposes the renewal of power purchase agreements with independent power producers (IPPs) having 5,000-megwatt electricity generation capacity, which are expiring in a couple of years.
The proposal was submitted by Special Assistant to Prime Minister on Petroleum Division Nadeem Babar to the cabinet, chaired by Prime Minister Imran Khan.
Now, the task force on energy is working on a policy, which will be submitted to the cabinet for formal approval. “Power purchase agreements with the IPPs including Kapco and Hubco are going to expire in coming years and the government will not renew the agreements,” Babar told The Express Tribune.
This means that the government will not continue to follow the power purchase agreements on a ‘take and pay’ basis, which binds the government to pay capacity charges. However, these power plants will be able to sell electricity to the Central Power Purchasing Agency (CPPA) in the summer season when demand is higher compared to the winter.
The power plants were set up under the Power Policy of 1994 and were based on furnace oil. The only flaw is that the past government had not foreseen the future scenario of prices of different fuels.
At that time, the price of furnace oil stood at Rs2,843 per ton, which was cheaper than the domestically produced gas. However, the price of furnace oil has now jumped up to Rs87,000 per ton, which is many times expensive than the price of indigenous gas.
“However, in the new policy, the government will examine the future scenario of fuel and gas prices,” said Babar. Now, the imported LNG and coal have also become part of the energy basket in addition to furnace oil and domestic gas.
The government will also forecast the future LNG price. At present, Qatar is the major LNG supplier to Pakistan. However, Australia and the United States are going to become potential suppliers in future, which may cause a decline in LNG prices. A senior government official said LNG prices may come down to $2 per million British thermal units (mmbtu) in the next 10 years.
However, according to experts, the LNG suppliers will form a cartel in the global market and control production in order to keep prices at a certain level.
In the case of oil, the US shale oil boom had shaken the global market and had even broken the monopoly of Organisation of Petroleum Exporting Countries (OPEC). Following this, the prices of crude oil touched $35 per barrel and several US and European companies shut down.
However, the oil-producing countries had control over crude oil production and prices again started rising. The same will happen in the case of LNG, say experts.
Pakistan has secured the cheapest LNG supply deals recently in spot purchase contracts. However, officials believe that in short and long-term contracts, Pakistan could have to pay 11-12% of Brent crude despite the lowest LNG contract at around 7% of Brent in spot purchases.
Singapore and South Korea have received contract prices of 11.8% and 11.7%, respectively. So, such scenarios should be kept in mind while framing the new power policy, an official said.
The government is considering offering economic incentives to the consumers. Officials said consumers would be offered discounted rates of electricity from the national grid when the demand stood low to lift electricity from those power plants whose contracts were going to expire.
According to the details shared by Pakistan LNG, PLL was the lowest bidder, which quoted a remarkable rate of *5.7395%* of Brent (approx. USD 2.2/mmbtu) for the cargo. Prices quoted by the other three bidders are Gunvor 7.8421%, PetroChina 8.3500%, Trafigura 10.3811%.
PLL received an offer for an Aug 27-28 delivery cargo at about $2.20/mmbtu. It is worth mentioning that Pakistan has been out of the spot market in 2020, and this is their first tender since November 2019.
A.A.H Soomro, managing director at Khadim Ali Shah Bukhari Securities told ProPakistani,
This is a game-changer! It’s time for Pakistan to relook at long term LNG contracts and move towards Spot purchase. Let’s assess the possibility of cancellation of the contracts. Bargain in your favor. This solves half of Pakistan’s problems if we speedify the LNG terminals. The economy would grow in leaps and bounds if we reduce energy costs now.
This is lower than the Asian LNG spot price LNG-AS for August which on Friday was estimated to be about $2.35 per mmBtu. The prices are expressed in the document as a “slope” of crude oil prices, a percentage of the Brent crude price, and are typically a pointer for the opaque spot LNG market.
Pakistan LNG has a separate tender to buy two LNG cargoes for delivery in September which closes on August 4.
Fitch Solutions stated that Asian spot LNG prices continue to hover at historical lows as COVID-19 continues to drag economic activity and demand.
The spot prices in Asia have remained depressed accordingly, falling by more than 50% since the start of the year to hit USD 2.5/mmBTU at the time of writing in July, from USD 4.0/mmBTU in January. YTD prices are shown to have averaged USD 2.7/mmBTU, halved from USD 5.4/ mmBTU in 2019 and less than a third of the USD 9.7/mmBTU averaged in 2018.
LNG imports into key importing markets in Asia – apart from China – have registered large y-o-y declines across the board as gas consumption across industry and commercial sectors slowed to a crawl as strict COVID-19 containment measures were observed.
The outlook for LNG prices was hardly rosy coming into the year even before the onset of the coronavirus pandemic, amid a negative backdrop of slowing coal-to-gas switching in China and a milder winter, although it looks to have deteriorated further as energy demand sinks across the region.
Before an agreement can even be reached, Clause 10 of the understanding says all outstanding dues owed to them should be settled “within an agreed time period”.
https://www.dawn.com/news/1575402 by Khurram Husain
The amount the government will have to pay for this settlement is estimated by the IPP managements to be above Rs200 billion. The total outstanding owed to power producers is Rs600bn, but not all of those producers are part of these talks. The IPP team tells me they expect a full settlement of all outstanding receivables owed to them before they will consider activating any of the other clauses in the MoU. But the language of Clause 10, where this understanding is written, does not specifically make activation of the terms of the agreement conditional on prior payment of outstanding receivables. The MoU simply says there will be “agreement on payment of receivables within an agreed time period”.
The language of the clause is carefully crafted to leave just enough ambiguity to let the IPPs decide either way, to either press for full payment or activate the terms against an agreed timeline only. They will probably check the temperature at decision time before choosing their course of action on this clause.
The other clauses in the MoU are minor details, even the IPP managements agree. The revised formulae for sharing of efficiency gains or the revision in the Delayed Payment Rate are nothing special. The reduction in the DPR is only for the first 60 days, for example, after which it reverts to an exorbitant Kibor plus 4.5 per cent.
The switch to “take and pay” — a reference to eliminating capacity payments — has been thrown indefinitely into the future since both sides agreed it can only happen after a competitive trading arrangement comes into being, an idea that has languished for more than 20 years already. There is little reason to believe it will happen in the next five years, and even that is being optimistic.
The committee has also agreed to abide by the principle of first in first out when making all future payments, which will prove to be costly for the government. Common practice that helped save the government money was to pay off those bills first that came with the highest interest rates, and FIFO ends that discretion.
The biggest allegation that launched this entire exercise in the first place was the one of “excess profits” that the IPPs were said to have made by misrepresenting their costs or their fuel consumption or their efficiency levels. The government marched into these talks alleging trillions of rupees worth of wrongdoing in “excess profits”. Yet under the MoU, the whole matter has been lobbed into Nepra’s court, which will decide only whether the profits were made in accordance with the 2002 policy, the tariff determinations and the power purchase agreements of the IPPs, based on numbers that were reconciled between government and the IPPs during these talks.
The rupee indexation of returns for local investors sounds good on the surface, until you see that the rupee has been indexed at 148 to a dollar. Given these plants made their equity investments in the year 2002, when the dollar was around a third of this value, the indexation compensates the IPPs very generously in return for losing their dollar-based certainty.
The government has done the right thing to seek these talks, and it has also done the right thing to ensure sovereign guarantees are not violated in the process. But these terms do little for the vaunted goal of tariff reduction. The terms in the MoU are meek and the IPPs have largely escaped the kind of accountability that the government was screaming about when this whole affair was launched. In the meantime, the circular debt, power sector governance and the rising power bills of consumers will remain large challenges for the government.
#Power sector woes: #Pakistan reins in Rs2.2tr circular #debt .
The poor governance - like low recovery of monthly bills and high power theft - has given birth to the complicated ‘circular debt’. #electricity #industry #economy | The Express Tribune
The poor governance - like low recovery of monthly bills and high power theft - has given birth to the complicated ‘circular debt’. This has continued to compromise working capital at power production, transmission, distributions and oil and gas supplying firms.
Moreover, the non-stop addition of new production plants despite stagnant demand for years has continued to inflate ‘capacity payment’ to the standby plants. ---
The two capital burdens - circular debt at Rs2.2 trillion and capacity payment at Rs1 trillion in 2020 - have crippled the power sector in the country.
“The high inefficiencies of distribution companies (like Quesco and Pesco) are contributing 60% towards the ever-growing circular debt, which is estimated to reach Rs4 trillion by 2025,” Engro Energy Limited CEO Ahsan Zafar Syed said while talking to The Express Tribune.
Secondly, their recoveries remain low by up to 40% against the monthly bills. A large number of the consumers are in the habit of not paying their bills despite many of them being capable.
He suggested that provincial governments should be given ownership of the distribution companies in partnership with corporate entities. The governments should be given the task of recovering bills and law enforcement agencies should come into action against those who don’t pay their bills, he said.
At present, distribution companies are a federal subject while law enforcement agencies remain provincial subject, he added.
The federal government may link recovery of monthly bills from consumers with the NFC award through which federal government transfer resources to provincial governments every year, he said.
The second biggest challenge in the sequence is excess power production capacity. The government should not approve of setting up new production plants. “We still have 7,000MW surplus production capacity in the system as of today. It is estimated to be around 3,500MW in surplus by 2025.”
The third imminent issue is lower demand for power. The demand has remained low over the last decade despite an increase in economic activities. “The demand increased by 4% CAGR (compound annual growth rate) compared to GDP growth at 5.3% CAGR over the decade (2007-2019),” he said.
Surprisingly, the demand for power from households has remained higher than the one from the industrial sector. “This happens nowhere in the world,” he highlighted.
Syed said the GDP grew on back of services sector instead of manufacturing one. “The government should create an enabling environment for industrialisation to increase power demand and reduce capacity payment.” Besides, industries should be offered incentives to use power from the grid instead of producing their 5,000MW through captive power plants.
The fourth challenge is the high cost of power. Pakistan produces the most expensive power in the world. “Our cost of power production is 26% higher for the industrial sector compared to other regional countries like Vietnam, Sri Lanka, Malaysia, Bangladesh, South Korea, Thailand and India. It is 28% costlier for residential areas than the regional countries,” he said.
Pakistan has added 10,000-12,000MW production capacity in recent years and another 10,000 to 12,000MW is in the pipeline. Surplus power production and capacity payment to the standby plants has remained a major cause of producing expensive power.
“The capacity payments are estimated to soar to Rs4 trillion in 2025 due to ill-integrated planning in the sector in the past,” said the company official.
#Pakistan has #electricity overcapacity but it still suffers #power shortages because of lack of #grid capacity. #PTI govt to increase investment in grid and delay about 10,000 MW worth of planned #coal/#wind power projects. #cost #debt #economy #PMLN https://www.bloomberg.com/news/articles/2021-01-27/pakistan-struggles-to-tackle-an-unfamiliar-glut-of-electricity
After spending decades tackling electricity shortages, Pakistan now faces a new and unfamiliar problem: too much generation capacity.
The South Asian nation’s power supply flipped to a surplus last year after a flurry of coal- and natural gas-fired plants were built, mostly financed by the Belt and Road Initiative launched by Chinese President Xi Jinping in 2013. Pakistan is slated to have as much as 50% too much electricity by 2023, according to Tabish Gauhar, special assistant to Prime Minister Imran Khan for the power sector.
That is problematic because the government is the sole buyer of electricity and pays producers even when they don’t generate. To help tackle the issue, the government has negotiated with producers to end that system, lower their tariffs and asked them to delay the start of new projects, according to Gauhar. It is also trying to convince industries to switch to electricity from gas.
“We have a lot of expensive electricity and that is a burden,” he said.
While the Chinese financing and the surplus is a welcome change after years of shortages that left exporters unable to meet orders and major cities without electricity for much of the day, two main problems remain. The first is a creaking network, and the second is the need to supply cheaper power while keeping emissions in check.
“Pakistan has overcapacity, yet it still has power shortages because of the unreliability of the grid,” said Simon Nicholas, an analyst at the Institute for Energy Economics & Financial Analysis. “They haven’t invested in the grid the same way they’ve invested in power plants.”
The last nationwide blackout happened just last month after an outage at the country’s largest facility. While the new plants have also boosted coal generation to a record fifth of the power mix, Pakistan plans to increase the share of wind and solar to 30%, while another 30% will be generated from river-run dams.
Pakistan will pay private power producers 450 billion rupees ($2.8 billion) in overdue electricity bills in a deal to reduce future tariffs. The government targets to pay 40% of that bill by the end of February, with the second payment slated before December, according to Gauhar. A third of the payment will be made in cash, with the rest in fixed income instruments, he added.
About 8 gigawatts worth of government-owned power plants will also have tariffs reduced. And Pakistan plans to negotiate lower tariffs for mining and power generation at the Thar coalfield, said Gauhar.
The government aims to delay about 10 gigawatts worth of planned power projects, including coal and wind plants, since there won’t be any need for them next year, said Gauhar.
THE government’s plan to settle the outstanding dues of IPPs amounting to Rs450bn in three tranches is only the first step towards liquidation of the power sector’s circular debt. According to reports, the IPPs will get 30pc of their existing debt stock this month and the remaining amount in two equal tranches in June and December. Under the plan, one-third of the arrears will be paid to the power producers in cash and the remainder in the form of Pakistan Investment Bonds at the floating rate. The IMF also gave its nod to the plan after the government agreed to heftily increase the base electricity tariff as demanded by the lender of the last resort. The payment of the first tranche will immediately lead to materialisation of the MoUs signed between the government and power producers in August last year into formal agreements. The MoUs provide for changes in the terms of the existing power purchase agreements that will reduce the size of the guaranteed capacity payments or fixed costs paid to the IPPs, a major source of accumulation of the circular debt. The government is expecting savings of Rs850bn over a period of 10 years, following the modifications in PPAs. The IPPs, which had demanded full payment of their money before they agreed to implement their revised PPAs, seem to have moved away from their earlier position in the ‘larger interest of the country’ as the plan will also help them improve their tight liquidity position and make new investments in new schemes.
The settlement scheme covers the 50-odd IPPs which were set up in the 1990s and 2000s and had consented to the alterations proposed in their power purchase deals with the government. The majority of these plants have completed their life cycles or paid off their debts. Therefore, we should not expect an immediate resolution of the circular debt problem even after materialisation of the revised deals with the IPPs. In recent years, the major build-up in the circular debt has been caused by capacity payments to large power projects set up since 2015, primarily as part of the multibillion-dollar CPEC initiative, with Chinese money. So far, no progress has been made to get the terms of the PPAs with these companies renegotiated although we are told that contacts have been made with Beijing at the highest level. Until these contacts pay off, the resolution of the mounting power-sector debt will have to wait.
Pakistan’s surplus power generation capacity has come at a price
The country confronts steep electricity payments amidst persistent blackouts.
Pakistan’s dilemma is a surplus of power generation capacity – a problem it has avoided since the late 1990s. “We are producing much more than we need,” Tabish Gauhar, the prime minister’s special assistant on power, has been telling the media since January.
In his public remarks, he points out that the country cannot afford the new electricity that has been in its system ever since a spate of Chinese-built power plants began to come online in 2017. Gauhar also attributes the bulk of the increased cost to “fixed capacity charges” that he says have “gone through the roof”.
By some estimates, the country has had to pay capacity charges of 85,000 crore Pakistani rupees a year in the last few years, a figure projected to rise beyond 1.45 lakh crore Pakistani rupees by 2023 – by when it will be larger than the country’s present peacetime defence budget.
Technically capacity charges are not a budgetary item (they are paid through power bills sent to consumers rather than out of the government’s own budget). The escalating cost of surplus power generation has meant a continuous rise in consumer power tariffs.
Capacity payments to IPPs:
FY 2017-18 cRs250bn
FY 2019-20 cRs900bn
FY 2029-21 > cRs 1.0tr
FY 2023 > Rs 1.5tr
2018 c106bn units
2019 c109bn units
From ‘18 to ‘23 Capacity payments increases by cRs1.25tr; or from Rs2.4/unit to Rs12/unit
Big problems with #Pakistan's IPP contracts signed by #PPP & #PMLN politicians: 1) Returns are guaranteed in US$ terms, not PKR. Devaluation of PKR has added billions to payments to IPPs. 2) Pakistan govt must pay capacity charges regardless of utilization
A European think tank has blamed the World Bank for a role in Pakistan’s energy sector problems over the decades and for rushing through a long-term power generation plan based on dirty and expensive fuels under its ‘prior actions’ of loan programmes.
Recourse — an Amsterdam-based non-profit organisation — claims it holds financial institutions to account for harms to people and the environment and is funded by foundations and organisations working for environment and development under the European Union.
In its report “World Bank’s Development Policy Finance (DPF) 2015-21: Stuck in a carbon rut”, the European think tank said its studies in Indonesia and Pakistan showed the WB was “accelerating the use of natural gas and supporting fragile energy sectors that are heavily invested in coal”.
“In Pakistan the case study observes how DPF can have unintended consequences, even when ostensibly it is seeking to support a renewable energy transition,” the report said, adding the $400 million Programme for Affordable and Clean Energy (PACE) 2021/22 focused on measures to support the country’s transition to low-carbon energy. This loan disbursement was dependent on a prior action that required a commitment from the Pakistan government to transition to 66pc renewable energy by 2030 through the adoption of Indicative Generation Capacity Expansion Plan (IGCEP), a least-cost generation plan. However, targets on renewable energy sources were slashed from 30-33pc of the energy mix to 17pc.
The energy plan includes the “commissioning of a portfolio of new generation projects including many hydropower projects, Thar coal-based projects, K-3 nuclear power plant, and over 4,000MW of solar- and wind-based renewable energy projects,” the report said, adding that the DPF was not subject to proper checks and balances in terms of transparency and accountability.
The report said the World Bank’s Prior Actions were opening a Pandora’s Box for unsustainable energy in Pakistan. The report said that despite the Paris Climate Agreement of 2015, the World Bank committed $1.1 billion between 2014 and 2016 to energy sector reform in Pakistan that had an emphasis on tariff reform as “Prior Actions” to the disbursement of funds. “This tariff reform paved the way for Pakistan’s National Electric Power Regulatory Authority (Nepra) to offer the most attractive upfront tariff for coal-fired power projects in the world”, thereby setting the stage for massive expansion of coal in the Thar region and beyond.
In 2021, Pakistan is completing its second year of foundational reforms to comply with ‘Prior Actions’ for three DPF operations amounting to $1.4bn. “In our analysis, the Prior Actions required by this DPF operation have had a destabilising effect on Pakistan’s ability to transition to a sustainable renewable energy pathway,” the report claimed.
On August 26, 2021, it said, Pakistan’s cabinet committee on energy under immense pressure to meet its Prior Actions towards the World Bank gave its hasty approval to the controversial IGCEP, which was approved a month later by Nepra with a strong dissenting note from Nepra’s vice-chairman who refused to sign it. The political pressure to fast-track the IGCEP came in August when WB Vice President Hartwig Schafer visited Pakistan and urged the government to accelerate the pace of power sector reforms.
The generation mix in the new IGCEP is now dominated by expensive and dirty fossil fuels, with additions of around 8.5GW of coal, and 10GW of LNG and gas to be made in the next 10 years. The IGCEP itself confirms that renewable energy is quickly becoming cheapest forms of new electricity generation, yet the IGCEP contradicts itself with the recommendation to rely less on these sources.
The obscenity of the IPP contracts, signed first by PPP and the dramatically expanded by PMLN, manifests in so many different ways. First there’s the take or pay terms that means we pay even if we don’t consume. Next there’s the uncapped dollar indexation, so that tariffs rise as
rupee falls. Effectively we get slapped any which we go. Even as the economy slows down with higher interest rates and possibly consumption falls, we pay higher tariffs as consumers since govt continues to pay for what may not be consumed. Those who signed these contract were mad
or determined to screw the country. They could have been both
The country’s power sector regulator on Wednesday indicated more increase in electricity tariff through Quarterly Tariff Adjustment (QTA) after the rupee plunged to over Rs225 to the US dollar against its estimates of Rs200 to the dollar.
This indication came from Nepra Chairman Tauseef H Farooqi during a public hearing on government of Pakistan’s motion with respect to increase in base tariff by Rs7.91 per unit, to be raised in three phases - Rs3.5 per unit in July, 2022, Rs3.5 per unit in August-September and Rs0.91 per unit from October onward. With this increase, the cumulative tariff of consumers will touch Rs40 per unit including taxes and surcharges from existing Rs27 per unit. The revised Schedule of Tariff (SoT) for distribution companies and K-Electric will be applicable after issuance of notification.
“We are in a catch 22 situation these days. The biggest problem is that the electricity consumers are troubled due to higher bills and others are concerned about the non-availability of electricity. Damned if we do, and damned if don’t” Chairman Nepra said adding that the country is passing through an “emergency” situation.
He further argued that fuel cost has increased by eight times and the rupee has touched Rs222 per dollar mark which are the main reasons for the increase in tariff.
“If the rupee value is reduced to half and fuel cost increased 8 times, then the cost of electricity generation increased by 16%. The country should not have opted for power generation on imported fuel,” he said adding that everyone knows what blunders Pakistan made with respect to power generation strategy.
Discos, KE’s base tariffs: Nepra all set to approve modifications
“If you ask me, I would say, we have committed a fundamental blunder. We should not have opted for imported fuel projects,” he maintained.
The regulator came under fire from consumers’ representatives, KCCI and media for being a “rubber stamp” with respect to passing on the proposed increase in tariff without raising any questions.
A Power Division team, headed by Joint Secretary, (Power Finance) Mahfooz Ahmed Bhatti, informed the authority that the government will extend a subsidy of Rs220 billion to the lifeline and protected category of consumers. He said that about 42% of total consumers are protected as no increase has been proposed for them. Nepra, in its determination of June 6, 2022 approved a revenue requirement of Rs2.584 trillion for FY2022-23 but the government decided to extend a subsidy of Rs220 billion to domestic consumers falling in the category of lifeline and protected, he added.
“Almost 50% of domestic consumers will not face a price shock due to the proposed increase of Rs7.91 per unit,” Bhatti maintained.
Naveed Ahmad from CPPA-G informed the authority that the government has also protected lower middle class consumers using 1-100 units per month and will pick up a subsidy of Rs11 per unit. The consumers using 101-200 units will be given a subsidy of Rs10.97 per unit.
Chairman Nepra inquired if the impact of the proposed increase of Rs0.91 per unit from October 1, 2022 will be offset by a drop in the existing QTA of Rs1.66 per unit, the representative of CPPA-G responded that the rationale is that with a drop of QTA of Rs1.66 per unit the impact will be reduced by Rs0.75 per unit in October 2022.
Nepra Director Tariff Mubashir Bhatti, further clarified that Rs7 per unit will be increased in July, August and September. However, the impact of Rs0.91 per unit will be offset with a drop of QTA of Rs1.66 per unit.
Joint secretary (Power Finance) Power Division said that revenue requirement was due from July 1, 2022 and now economic assumptions have further changed and which are changing every day.
Chairman Nepra forced Power Division’s team to make a categorical statement before the Authority that the former was not responsible for any delay in notification of tariff increase as reported in the press.
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